What's the alternative to data center moratoriums? Two moves this month out of Texas and Washington, D.C., suggest it could be pressure for faster regulation and policymaking.
Instead of stopping data center development because of community concerns, these steps put pressure on policymakers and the industry to more quickly address concerns with new rules and regulations.
First, Texas Gov. Greg Abbott sent a letter on June 10 calling on the state's utility regulator and electric grid operator to deliver a plan within five weeks to keep residential power users from bearing the cost of infrastructure needed to support data centers. He also pledged to tackle data center related issues, including lower rates, water-efficient cooling technology, and noise reduction, when the Legislature convenes this fall.
Second, the U.S. Federal Energy Regulatory Commission (FERC) on June 18 issued a series of orders for the six regional electric grid operators aimed at getting big new electricity users — mainly data centers and manufacturers — onto the country's electricity transmission system faster, without disrupting reliability or shifting costs onto residential power rates. Here’s an overview of what the two directives ask for.
Texas Governor's Letter: Focus on Residential Ratepayers
Gov. Abbott's June 10 directive to the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) sets aggressive timelines to understand whether residential electricity customers are protected from higher rates due to data center expansion. It calls on the agencies to submit a memorandum by July 17 outlining steps taken, statutory limits to their authority, and laws needed for such protection. It calls on the PUCT by July 31 to take action to reduce residential transmission costs and require data centers to pay for all costs associated with building power infrastructure for their operations.
Abbott also pledged to work with the Legislature in this fall’s session to codify requirements that data centers use water-efficient cooling systems, report on electricity and water usage for state planning, and adopt good neighbor practices such as setbacks and noise reduction. He’s also looking to phase out certain data center tax incentives.
The directive comes as Texas is poised to become the world’s largest data center market, with the rapid development of facilities raising concerns in some communities. Many developers opening data centers in Texas have voluntarily pledged to address these issues, including paying for necessary infrastructure, contributing to the electric grid, using water- and power-efficient systems, and creating tax revenue and jobs.
FERC Show Cause Orders: Accelerating Grid Connections
FERC's June 18 orders represent a “sweeping review of how regional markets serve large new loads as AI-driven electricity demand grows,” Data Center Knowledge’s Shane Snider writes.
Looking to spur the evolution of electric markets, FERC directed the six regional grid operators—PJM Interconnection, Midcontinent Independent System Operator (MISO), Southwest Power Pool (SPP), California Independent System Operator (CAISO), ISO New England (ISO-NE), and New York Independent System Operator (NYISO)—to justify or revise tariff rules governing large-load connections.
Grid operators and their transmission owners have 60 days to explain why current tariffs remain just and reasonable without rules tailored to large loads, or to file revisions addressing FERC’s concerns. They also have 30 days to explain how they will ensure enough generation is available for existing and anticipated new large loads.
FERC identified five areas requiring potential reform: transmission service application and study processes; cost-allocation mechanisms to prevent existing customers from paying for upgrades required by new loads; co-location arrangements and behind-the-meter generation; new transmission services tailored to flexible large loads; and processes for evaluating generating facilities serving electrically proximate or co-located large loads. FERC isn’t calling for one federal standard, and instead recognizes that regional market differences will lead to different approaches.
These are just two recent examples that point to how lawmakers and regulators are looking to address community or operational concerns while keeping data center development moving ahead. The coming months, including this fall’s elections, will tell us if policymakers are more inclined to pick up the pace on rulemaking or slam the brakes on development.